1) Introduction
We often hear about the apocalypse of the retail market and the alleged disappearance of shopping centers and high street retail stores and boutiques.
It is a familiar refrain, which is often repeated to us: chains expand too fast, and the medium level malls are oversized and they are dying. E-commerce is devouring physical stores, especially when it comes to high street retail stores.
2) The Decline of High Street retail: How? And Why?
The decline of the high street implies the disappearance of shops and local jobs. The number of people working in stores in Britain has fallen by 2.4% in the first quarter of 2017 and, for many people, it clearly represents a shock to local communities.
Over the years, high streets market has seen many ups and downs, usually in line with the economic trend, and the current negative turnaround began with the financial crisis.
Today, retailers face a multi-pronged attack: the dizzying rise in property prices is increasing store expenses, while the fall in the post-Brexit pound raises the cost of many assets with the slowdown in spending by the consumers. (Williams-Grut, 2017)
However, the biggest challenge remains the transition to digital. The British who buy, it increasingly does it online. At the beginning of the year, the UK Cards Association stated that Britain spends more online than any other nation: € 5,021 per person each year. (Peachey, 2017)
According to the latest Google data, 61% of consumers prefer to buy in a physical store, because, according to 80%, this will allow them to have the article immediately. However, before going to the store, 78% search the internet.
In short, today’s consumer wants to get what he buys right away but he also wants to make sure his money is spent in the best possible way. (Google, 2018)
These first data tell us two important things: the physical store can no longer postpone digitalization if it wants to become part of the journey of its potential customers and E-commerce must work on the shipping phase if they want to conquer that 61% of consumers who today make the purchase in a physical store.
Beyond preferences, however, Wearesocial’s latest 2019 report says that two people out of three still make purchases or payments online, and 42% makes them through mobile devices. (Debora, 2019)
According to (Statista, 2017):
“In the United Kingdom, concerns about the future of the high street are ever-present, with online sales now accounting for 21.5 percent of the country’s total retail sales.”
The prementioned panorama is supported by many kinds of research that underline the rising decline of footfall and sales figures in retail centers.
3) Analyzing pedestrian traffic to understand consumers (Foursquare case):
Foursquare (self-defined as a “technological company that exploits geographical intelligence to create customer experiences and useful business solutions” (Foursquare, 2017)) thanks to their “Pilgrim technology” and their ability to distinguish between shopping centers and places located in high streets, designed a market survey that aims to observe what happens to pedestrian traffic when new stores are opened in US shopping malls and along the High streets: “In 2017, footfall in retail centers dropped in every month compared to the previous year, while sales experienced declines as high as 5.2%.” (See APPENDIX A)
Data in hand, during 2018, according to a study by Cushman & Wakefield (CUSHMAN & WAKEFIELD, 2018)(a company operating in the US commercial real estate sector), there were 9,000 stores that closed and forecasts for 2019 show an increase in the share, the number of shops that shut down seem to be destined to rise by breaking abundantly 10,000. Not only the small “independent” stores but also branches of large chains like Macy’s and Sears closed. In addition to the closure of stores and large chain stores, again in 2017, in America, around 50 large retail chains went bankrupt.
4) Does technology affect retail?
Every technology and every innovation bring with it a change in ways of doing things.
If we refer to purchases, it is clear how the ease and the speed of buying on e-commerce, with the mobile phone can upset the entire physical store sector.
Millennials, for example, who have fully experienced this technological revolution, are defined as the generation of “everything and immediately”. This attitude leads them to prefer an online purchase, in a catalog and with a simple click.
Amazon and other platforms took this opportunity and provided this online shopping model on a platter. Amazon has even patented the “1-click button” system and the “dash buttons” to make the purchase as immediate as possible. (I want it. I buy it. 1-click!)
Even large brands have started using their websites, turning them into e-commerce and bypassing the figures that intermediary the sale of their products. But not just E-commerce: through the amount of data collected online and AI algorithms, brands will be able to advise and show us products based on our preferences and in an increasingly accurate manner.
Moreover, with VR (Virtual Reality) and AR (Augmented Reality) devices, we will be able to see how clothes fit or how to place a piece of furniture in the home even before buying it. And maybe soon after buying it through a virtual voice assistant and getting it straight to your home.
5) “Shopping” according to Millennials:
In this context, “shopping”, as a specific and determined activity that takes place in a given place and time, becomes an outdated concept.
The purchase is an instant activity that can be carried out anywhere (at home, on the move, at work, at leisure) and at any time.
Today we must be aware that the purchase moment is no longer a rigidly defined phase and that the interpretative model used so far is no longer adequate: in fact, technology anticipates the moment of purchase, which comes to be ever closer, almost contextually, at the moment when the consumer realizes he has a new need.
This new perspective is confirmed by three increasingly popular trends (Reinartz, 10 March 2016):
- Immediate purchase (Amazon model)
- Automatic purchase (Whirlpool washing machines, for example, which order detergent after a certain number of washes)
- Purchase by subscription (Spotify / Netflix model)
The retail model will have to change in order for it to reflect this new reality and these new needs generally associated with millennials, a generation that has most impacted on the concept of retail.
When making a purchase, they want to move freely between the smartphone, the tablet and the store. They could take advantage of all these channels and then make a single purchase, and the seller must be able to adapt.
Millennials are more interested in experiences rather than material goods, and the buying process itself is an experience (whether online or in-store) so the offer must work in this sense.
6) Innovation and Experience: the future of High Street Retail
The concept of “store”, while remaining a fundamental junction in the relationship between company and consumer, is destined to a profound transformation. The birth of new sales channels (e.g. e-commerce) frees the store from the function of access to the product: the store becomes a place of relationship to let its consumers live an effective and satisfying experience.
The retail of the future, in fact, will be increasingly “experiential”; Luxury brands like Ralph Lauren, Prada, Gucci, are investing in cafés and restaurants and, data in hands, they are on the right track: in the future, however, the experiences will evolve into “artistic, scientific events, better if visually spectacular, in order to be shared on Snapchat or Instagram. It will also focus on volunteering, well-being, and also on personal growth activities or festivals that combine innovation, spirituality and proper nutrition”. (The Innovation Group, 2016)
Of course, this poses enormous creative challenges, because brands will no longer be appreciated for the logo or the products themselves, but for the experiences they will be able to offer, a much more subjective aspect than a mere price.
Paradoxically, however, given that the high street physical stores will be the center of this evolution, these new tools will help in-store sales, where you will find sales assistant robots able to read the emotions of a customer, virtual reality (already successfully tested by Tommy Hilfiger in some stores, where you could buy the AW 2015 collection like sitting on the front row of the fashion show), artificial intelligence and “emotional retail” (the UMood one, a device launched by Uniqlo that suggests the shirt that best suits the mood of the client, whose brain signals he reads).
These are expensive innovations, which only giants can afford, at least for now: this is why Amazon is often the forerunner in this sense, and every innovation is raised for other retailers.
For example, when it will launch its “Prime Air” service (drone delivery in 30 minutes), it won’t be easy to keep up. But even for this, according to Morgan Stanley (Ray, 2016), by 2020, 19% of clothing sales in the United States will be on Amazon.
However, the benchmark to look at is China, where the mix between the use of online social-shopping-experiential luxury is in some ways more advanced than Western markets and pushes the construction of “physical” shopping malls.
The digital revolution could become the second life of the retail trade, with just a few simple rules are put into practice immediately and tools are put in place with the best technologies available on the market.
7) Recommendations according to an expert:
“The retail world will change because stores must redefine their use function”, said L. B., Store and Marketing Manager for a big food retail shop in Milan, during an interview. On the function of stores, he added: are they still places delimited by walls in which to store goods and wait on the threshold for someone to come and buy it? Probably if we look at them like this, we are doing the job of eCommerce, which has no space constraints, has no time constraints, nor holidays, etc.” (L.B., 2019)
Moreover, the expert pointed out some recommendations for stores to keep up with times and to develop the retail of the future.
Talking about the concept of Experiential Retail, the expert stated that, among all, whatever type of campaign it is chosen to undertake, every store has to keep in mind that entertaining consumers is not enough. Instead, they should present products in such a way as to entice participants to make purchases.
Additionally, creativity is also a critical element. Events must be fun, unique and even unusual. The originality or extreme value will stimulate the enthusiasm of the participants, encouraging word of mouth and sharing the event on social media through photos and videos.
8) Limitations of the research and Conclusion:
Despite the attempt to present the subject as clearly as possible, this paper presents obvious limitations.
- First of all, in the research carried out, limited samples were taken into consideration: only main markets that could act as a guide to the topic were included (UK and US).
- Secondly, reference was made to the reality of the high street retail of major cities, not considering minor realities of countries and villages which, despite their small size, also present main streets dedicated to retail.
- Finally, for reasons of time and resources, only one interview was conducted with a representative of the retail market, which represents a clear methodological gap.
Nevertheless, projects and solutions are really many and two are the main conclusions.
If on the one hand it is necessary to push towards a new idea of shop that reviews the relationship between business and consumers, on the other, it is also true that there is still no reference model recognized as surely winning. In fact, we are still in a phase of experimenting with innovative proposals, verifying their attractiveness and their cost-effectiveness.
2019-3-21-1553177793